PAUL L. FRIEDMAN, District Judge.
This is an action to enforce a foreign arbitration award rendered in the Republic of Honduras by Honduran arbitrators under Honduran law. The underlying dispute arose out of a construction contract between petitioner, DRC, Inc. ("DRC"), and the Fondo Hondureño de Inversión Social ("FHIS")—an instrumentality of respondent, the Republic of Honduras (the "Republic")—under which DRC agreed to construct certain water and wastewater sub-projects in Honduras. DRC demanded arbitration with FHIS, and, after approximately twenty-four days of arbitration proceedings, an arbitration award was rendered against FHIS that required FHIS to pay DRC over $51 million. DRC has now petitioned this Court for confirmation of this arbitration award against the Republic of Honduras.
There are six motions currently pending before the Court: (1) the Republic's motion to stay; (2) the Republic's motion to dismiss; (3) the Republic's motion to bifurcate; (4) the Republic's motion to dismiss with prejudice because of DRC's alleged severe litigation misconduct; (5) DRC's motion to strike materials submitted by the Republic in support of its motion to dismiss; and (6) DRC's motion to place certain filings under seal. Upon consideration of the parties' papers, the relevant legal authorities, and the entire record in
Hurricane Mitch struck Central America in 1998 and caused tremendous destruction and dislocation. See Mot. at 1. In response, the United States Agency for International Development ("USAID") funded reconstruction projects in various Central American countries, including Honduras. Id. One such project was undertaken in collaboration with FHIS, an instrumentality of the Republic of Honduras. See id.
FHIS and DRC therefore entered into a construction contract on June 21, 2000. See Pet., Farmer Aff. Ex. B, Construction Contract ("Construction Contract") at 9, June 21, 2000; see also Pet. at 2; Pet. Opp. at 4. According to the Republic, the Construction Contract expressly provided "that the work would be funded by USAID, and USAID would pay DRC."
The Construction Contract between FHIS and DRC required that all controversies and disputes be governed by the Construction Contract Liability Clauses. Construction Contract at 8; see also Pet. at 3. According to DRC, the Construction Contract Liability Clauses state "the parties' agreement to resolve disputes arising under the Contract pursuant to arbitration." Pet. at 3; see Pet., Farmer Aff. Ex. C, Mandatory Clauses, Construction Services Contracts at 17 ¶ 9(c).
In June and July 2004, DRC brought two suits against the United States government in the United States Court of Federal Claims. See DRC, Inc. v. United States, Civil Action No. 04-940C (Fed.Cl., filed June 1, 2004); DRC, Inc. v. United States, Civil Action No. 04-1124C (Fed.Cl., filed July 7, 2004). The first suit, Civil Action No. 04-940C, arises out of the Letter of Commitment that USAID provided to DRC in connection with the Construction Contract. See Mot. at 7. DRC alleges that the Letter of Commitment created a contract between DRC and USAID, and that USAID breached that contract by failing to pay certain invoices. See Mot., Basombrio Aff. Ex. 20, Complaint in Civil Action No. 04-940C ¶¶ 28-32. The second suit, Civil Action No. 04-1124C, relates to an assignment to USAID of a different contract between DRC and FHIS. See Mot. at 7; see also Mot., Basombrio Aff. Ex. 26, Complaint in Civil Action No. 04-1124C ¶¶ 44-48.
Several months later, in September 2004, the United States brought suit against DRC in this Court, asserting claims under the False Claims Act and the common law. See United States v. DRC, Inc., Civil Action No. 04-1608 (Roberts, J.) ("FCA Action"). In this FCA Action, the government "seeks to recover payments made to [DRC] for contract infrastructure work in Honduras, alleging inter alia that DRC misrepresented itself in order to obtain the contract and subcontracted out most of the work without USAID's approval." Memorandum Order at 1, Feb. 17, 2009 (Oberdorfer, J.); see also Mot. at 6-7.
After the United States filed the FCA Action against DRC in this Court, it moved for a stay of the two proceedings before the Claims Court. That court, over DRC's objection, granted the government's motion, finding that
In early 2009, DRC demanded arbitration with FHIS. Opp. at 8; Pet. at 3. DRC sought damages totaling over $86 million, arising out of purported breaches of the Construction Contract. See Pet. at 3. Arbitration proceedings commenced and, as DRC describes it, "[t]he arbitral tribunal consisted of three Honduran attorneys," Opp. at 8, and the arbitration proceedings resulted "in approximately 24 hearing days during which [DRC and FHIS] presented approximately 29 witnesses including 10 expert witnesses, performed 7 site inspections in two countries, and introduced approximately 2,165 documents." Id.; see Pet. at 4. The arbitral tribunal rendered the arbitration award ("Award") on September 8, 2009. Pet. at 4. The Award required that FHIS pay DRC $51,482,556.90, consisting of the following:
Pet. at 5.
Two months later, on November 11, 2009, DRC filed an action before the Honduran Supreme Court, requesting acknowledgment and execution of this Award. See Opp. at 14; Mot. at 2; Mot., Urquiza Decl. Ex. 3 at 1, DRC's Petition for Acknowledgment Before the Honduran Supreme Court, Nov. 11, 2009. FHIS opposed DRC's request, contending "that the subject arbitration award should not be enforced based on various grounds, including based on procedural irregularities, as being in contravention of Honduras law, and pursuant to various provisions of the applicable international arbitration treaty." Mot. at 2. On February 24, 2010, DRC filed a request in the Honduran case for "temporary suspension of the recognition and enforcement proceedings .... considering that efforts are being made with the competent authorities of the State of Honduras to seek an amicable settlement by mutual agreement that best suits the interest of both parties." Reply, Milla Decl. Ex. 2, DRC Temporary Suspension Request at 1, Feb. 24, 2010. FHIS filed a response, agreeing to a suspension of sixty days but asserting that after the conclusion of that time, DRC "must file the proceedings or make final withdrawal of the petition." Reply, Milla Aff. Ex. 3,
On April 30, 2010, the Honduran Supreme Court granted DRC's request and ordered a "temporary suspension of the present proceedings under the conditions and reservations made" by FHIS—which presumably includes the sixty-day limitation on the temporary suspension. Opp., Farmer Aff Ex. G, Order Granting Temporary Suspension Request at 1, Apr. 30, 2010. Therefore, after sixty days had passed, on July 2, 2010, FHIS submitted a request to the Honduran Supreme Court that it proceed to adjudicate the matter before it. Reply, Milla Decl. Ex. 5, FHS Petition for Continuation at 1-2, July 2, 2010. Thus, this foreign enforcement action is currently pending in Honduras.
Meanwhile, on January 5, 2010—two months after DRC filed its foreign enforcement action but before DRC requested a temporary suspension of that action— DRC filed a parallel petition in this Court. See Pet. at 1. DRC requests that this Court confirm the Award and contends that none of the grounds for refusal or deferral of recognition or enforcement apply. Id. at 6. In response, among other motions, the Republic has filed a motion to stay or, in the alternative, dismiss this action. See generally Mot.
Actions to enforce foreign arbitration awards are governed either by the Inter-American Convention on International Commercial Arbitration ("Inter-American Convention" or "Panama Convention") or the Convention on Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"). See INTER-AMERICAN CONVENTION, Jan. 30, 1975, S. Treaty Doc. No. 97-12 (1981), 1438 U.N.T.S. 248; NEW YORK CONVENTION, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3. Here, the parties agree that the Inter-American Convention applies. See Pet. at 6; Mot. at 13-14 n. 2; see also 9 U.S.C. § 305(1). Both conventions, however, "`are intended to achieve the same results, and their key provisions adopt the same standards, phrased in the legal style appropriate for each organization.'" Energy Transp., Ltd. v. M.V. San Sebastian, 348 F.Supp.2d 186, 198 (S.D.N.Y.2004) (quoting H.R.REP. NO. 501, 101ST CONG., 2D SESS 4 (1990), reprinted in 1990 U.S.C.C.A.N. 675, 678); see also International Ins. Co. v. Caja Nacional de Ahorro y Seguro, 293 F.3d 392, 396 n. 9 (7th Cir.2002) (noting that various provisions of both conventions "are substantively identical"). It is therefore expected that federal courts will achieve "`a general uniformity of results under the two conventions.'" Energy Transp., Ltd. v. M.V. San Sebastian, 348 F.Supp.2d at 198 (quoting H.R.REP. NO. 501, 101ST CONG., 2D SESS 4 (1990), reprinted in 1990 U.S.C.C.A.N. 675, 678).
Under 9 U.S.C. Section 207, a court "shall confirm" a foreign arbitration award "unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in" the Inter-American Convention. 9 U.S.C. § 207; see 9 U.S.C. § 302 (providing that "the Convention" referenced in 9 U.S.C. § 207 "shall mean the Inter-American Convention"). Under Article V(1) of the Inter-American Convention, such grounds include:
INTER-AMERICAN CONVENTION, art. V(1). Article V(2) sets forth two additional grounds, providing that
INTER-AMERICAN CONVENTION, art. V(2).
Finally, Article VI of the Inter-American Convention provides a court with the discretion to "postpone a decision on the execution of the arbitral decision" if there is a pending action in the State in which, or according to the law of which, the arbitral award was made. INTER-AMERICAN CONVENTION, art. VI. In such case, Article VI further provides that a court may, "at the request of the party requesting execution,... instruct the other party to provide appropriate guaranties." Id.
Invoking Article VI of the Inter-American Convention, as well as this Court's inherent authority to control the disposition of its cases, the Republic of Honduras contends that this action should be stayed until after the final adjudication of three prior, pending actions: (1) the United States' FCA Action against DRC, currently pending before Judge Roberts; (2) DRC's action against USAID, Civil Action No. 04-940C, currently stayed in the Court of Federal Claims; and (3) DRC's foreign action to enforce the Award, currently pending before the Honduran Supreme Court. See Mot. at 2, 10; see also Pet. Opp. at 2. The Republic asserts that a stay will "foster judicial economy, avoid duplication of effort, promote judicial and the parties' efficiency and justice, and prevent inconsistent judgments, which may be embarrassing to the United States' relations with Honduras." Mot. at 10.
More specifically, with respect to the FCA Action, the Republic argues that because the Award "is based on the same transactions and contract" at issue in the FCA Action, "[i]f the United States prevails, DRC would be held to have committed fraud in connection with the underlying transaction and contract which would be grounds to invalidate the award." Mot. at 2.
DRC opposes the Republic's motion for stay. First, DRC argues that the matters raised in the FCA Action were addressed and rejected during the arbitration. Opp. at 16. Thus, DRC contends that the arbitration tribunal's rejection of any alleged fraud on DRC's part "is now final and binding." Id. Second, DRC argues that the action in the Claims Court "will not decide any issues that are relevant here." Id. at 18. Finally, DRC argues that its action before the Honduran Supreme Court "has been suspended and might never result in a decision." Id. at 15.
The Court agrees with the Republic of Honduras that this action should be stayed in light of the pendency of the prior, parallel action currently before the Honduran Supreme Court, DRC, Inc. v. Fondo Hondureño de Inversión Social, Case No. 301-2009.
This Court has previously set forth the framework for determining whether to postpone a decision to enforce an arbitration award pursuant to Article VI of the New York Convention. See Continental Transfert Technique Ltd. v. Federal Gov't of Nigeria, 697 F.Supp.2d 46, 59-60 (D.D.C.2010). That framework is equally applicable here given that the relevant text of Article VI of the Inter-American Convention is substantively identical to that of the New York Convention and that the two conventions "`are intended to achieve the same results.'" Energy Transp., Ltd. v. M.V. San Sebastian, 348 F.Supp.2d at 198 (quoting H.R.REP. NO. 501, 101ST CONG., 2D SESS 4 (1990), reprinted in 1990 U.S.C.C.A.N. 675, 678); see also International Ins. Co. v. Caja Nacional de Ahorro y Seguro, 293 F.3d at 396 n. 9.
Article VI of the Inter-American Convention gives the Court the discretion to decide whether an action should be postponed —that is, stayed or dismissed without prejudice. See Continental Transfert Technique Ltd. v. Federal Gov't of Nigeria, 697 F.Supp.2d at 59. Although the United States Court of Appeals for the District of Columbia Circuit has not yet had occasion to offer much guidance regarding the manner in which a district court should "postpone" a case brought under the Inter-American Convention, "the Second Circuit has addressed at
Continental Transfert Technique Ltd. v. Federal Gov't of Nigeria, 697 F.Supp.2d at 59-60 (alteration in original); see also Nedagro B.V. v. Zao Konversbank, Civil Action No. 02-3946, 2003 WL 151997, at *5-7 (S.D.N.Y. Jan. 21, 2003).
In this case, the Europcar Italia factors weigh in favor of a stay. The Award was rendered in the Republic of Honduras by Honduran arbitrators under Honduran law. Opp. at 8; Pet. Mem. at 6; Mot. at 13. On November 11, 2009, DRC filed a petition for acknowledgment and execution of the Award before the Honduran Supreme Court. See Opp. at 14; Mot. at 2; Mot., Urquiza Decl. Ex. 3, DRC's Petition for Acknowledgment Before the Honduran Supreme Court at 1, Nov. 11, 2009. Subsequently, on January 5, 2010, DRC brought a parallel action in this Court. The fourth factor therefore weighs strongly in favor of postponement given (1) that DRC brought the foreign proceeding to enforce the award as well as the parallel
DRC argues, however, that the foreign enforcement action before the Honduran Supreme Court "has been suspended and might never result in a decision," Opp. at 15. Thus, according to DRC, "the status of the foreign proceedings and the estimated time for those proceedings to be resolved" weighs against postponement. Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d at 317. The Court finds this argument unpersuasive for two reasons. First, any delay with respect the foreign enforcement action must also "be laid at the plaintiff's door," Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d at 317, because it was DRC that requested the suspension. See Reply, Milla Decl. Ex. 2, DRC Temporary Suspension Request at 1, Feb. 24, 2010; see also Pet. Reply at 13.
The Court therefore finds that it would be "acting improvidently by enforcing the award prior to the completion of the foreign proceedings" in Honduras. Europcar Italia S.p.A. v. Maiellano Tours, Inc., 156 F.3d at 317. Because DRC petitioned the Honduran Supreme Court to recognize and enforce the Award issued in Honduras pursuant to Honduran law prior to initiating its action in this Court,
Spier v. Calzaturificio Tecnica S.p.A., 663 F.Supp. 871, 875 (S.D.N.Y.1987); see also Nedagro B.V. v. Zao Konversbank, 2003 WL 151997, at *7 (deferring decision on a petition to confirm an arbitration award in light of the pendency of a parallel foreign action commenced by petitioner to confirm the award); Fertilizer Corp. of India v. IDI Mgmt., Inc., 517 F.Supp. 948, 961-62 (S.D.Ohio 1981). Accordingly, the Court will grant the Republic's motion to stay and will postpone ruling on DRC's petition in light of the pendency of the prior, parallel action before the Honduran Supreme Court, DRC, Inc. v. Fondo Hondureño de Inversión Social, Case No. 301-2009.
One final matter requires discussion. Article VI of the Inter-American Convention provides that the Court may, "at the request of the party requesting execution, ... instruct the other party to provide appropriate guaranties." INTER-AMERICAN CONVENTION, art. VI. Invoking this provision of Article VI, DRC has requested a guaranty: "[I]f the Court postpones enforcement, DRC requests that the Republic be ordered to post appropriate guaranties, equal to the amount of the Award, plus interest." Pet. Reply at 13. The Court will not require the Republic of Honduras—a sovereign state that presumably is solvent and will comply with legitimate orders issued by courts in this country or in Honduras—to post any guaranty in this case.
For the foregoing reasons, the Republic of Honduras' motion to stay [Dkt. No. 11] is GRANTED. An Order consistent with this Opinion shall issue this same day.
SO ORDERED.